Score-settling budget looks after mates

Peter Martin

The budget was an exercise in settling scores and looking after mates.

Sure, it improved the nation’s finances. But at every turn it took the opportunity to punish or threaten the Coalition’s critics while protecting its supporters. Australians on benefits get their incomes cut by up to 10 per cent and in some cases 18 per cent. They will be charged for previously free visits to the doctor. Organisations that normally speak up for them such as the Council of Social Service have been told their government funding will be extended by only six months this year and then the contracts put out to tender.

Coalition pets such as the banks, private health insurance industry and private schools get off lightly.

Big food, big tobacco and big alcohol have been thrown the carcass of the Australian National Preventive Health Agency. Like the introduction of Medicare co-payments the move won’t actually save the budget any money because the savings will be redirected to medical research, but it will please corporations which have been amongst the Coalition’s biggest backers.

Coalition pets such as the banks, private health insurance industry and private schools get off lightly. The government will hand private schools $6.8 billion in the coming financial year - no cutback on what was scheduled - and $9.3 billion the following year. The private health insurance rebate survives with barely a scrape. It’ll cost $5.5 billion this coming financial year and $5.8 billion the next.

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And the banks profit hugely from the tens of billions of dollars handed out every year in superannuation tax concessions, also untouched.

They are about to be given a second helping. Hurriedly pushed on to the back burner in March when assistant treasurer Arthur Sinodinos stepped aside over questions about his behaviour at the NSW Independent Commission Against Corruption, the government is about to revive its attempt to neuter parts of the financial advice law.

It wants what the banks want. They want to remove the requirement for financial planners to always act in their clients' best interests, and they want to reintroduce limited commissions.

It rewarded its tellers for trawling through information about their customers to find prospects for financial planners.

“A lot of people, what they don't understand is that the teller will be looking up their details on the bank's information system, identifying if they could be sent to a planner,” a former Commonwealth planner said. “They are given targets for referrals each week.

“The emphasis is always on trying to get the maximum share of wallet out of each customer. The planners have actually been incentivised or forced in a way to give advice that's not in people's best interests, and the whole system is really structured to bring that about.”

Four Corners told stories of families almost brought to ruin after the Commonwealth Bank and its representatives steered them out of safe products into dangerous ones, in some cases “without ever explaining the risks”.

Labor’s law, already in place, requires financial planners to take all reasonable steps to act in the best interests of their clients.

The banks and the Coalition want to water this down so they merely have to complete a checklist of six specific steps. Monash University corporate law specialist Paul Latimer told the Senate inquiry that removing the overarching best interests requirement would be like leaving doctors with only a few specific boxes to tick instead of asking them to also ensure they were acting in the best interests of their patients.

And they want to allow tellers to once again receive commissions for pushing products and advisors their customers’ way.

Why? Right now the big four banks with the AMP control 80 per cent of the financial planning industry. If they can’t leverage their tellers that share will shrink. And incentives work.

In 2012 two economists from the Federal Reserve Bank of Chicago and Ohio State University published a study entitled Do Loan Officers’ Incentives Lead to Lax Lending Standards?. It found that loan officers whose pay was supplemented by incentives wrote 19 per cent more loans than those whose pay was not. And the loans they wrote were 28 per cent more likely to default.

The banks need to blunt the Future of Financial Advice Act. But it’s less clear why the Australian government needs to blunt it. It’s true that banks have been big supporters of the Coalition. One of them, the National Australia Bank, employed the assistant treasurer Arthur Sinodinos as an executive after he left John Howard’s office and before he joined the Senate where he drew up the pro-bank legislation the government is about to introduce.

Governments aren’t meant to play favourites. This one has, and it’s about to do it again.

298 comments so far

The fact that this logic-free government is going out of its way to water down the integrity of the fofa regulations, shows the dodgy priorities that they hold. Australians will get dudded by this mob, only too willing to give big corporations whatever they wish.

Commenter

meatatarian

Date and time

May 20, 2014, 12:18AM

Sadly - it was all too predictable.... unless you were the unthinking bogan who was consumed the tabloid media.

The adults are in charge. And with their patronising paternalism will tell the wreched poor, that they are very bad, lazy and because of labors debt and deficit disaster will be punished accordingly. And the media will slavishly follow everything they say.

Pass the cigars boys!

Commenter

Tadd

Date and time

May 20, 2014, 1:10PM

Just how did big corporations win a government power when they don't even vote?

A democracy should be one person one vote, but thanks to Murdoch and big business it's become one dollar one vote.

If you think the budget is tough slogging the poor over 10% of income and the rich less than 1% of income, wait for the GST increase! That will make the great divide even bigger.

Commenter

Casa

Location

Sydney

Date and time

May 20, 2014, 1:11PM

Worse still it is a government that appears to be vision free and principles free. To suggest that revenue raising measures that include increases in taxation including GST should be driven from anywhere other than through our federal government is a disingenuous ridiculous nonsense.

Commenter

Seriously

Date and time

May 20, 2014, 1:18PM

The budget coverage in this newspaper is outrageous. Look at the vast number of articles like this one blasting Leftist ideology from a megaphone (apparently Libs are all evil people intent on inflicting pain on poor people), or personally attacking public figures like Treasurer Hockey because he's now well off (after starting with nothing).

Zero balance. Zero facts.

But the rubber hits the road on shows like Q&A where audience members ask questions of the Treasurer based on what they've read in Fairfax that shows all Australia how misinformed they are. Watch last night's Q&A if you care to understand the actual facts.

Commenter

Jordan

Date and time

May 20, 2014, 1:18PM

It sounds like a conspiracy theory, but isn't.

They are a corporate front. The Liberal Party has been caught the disease of the Tea Partying Republican party in the close alignment (being by and for) with corporations.

The overturning of FOFA to benefit big business is a shocker.

The naked attempt to neuter public health initiatives to benefit unhealthy big business is a shocker - that Fiona Nash is still a Minister is a dark stain on our democracy.

The removal of the carbon price and MRRT to benefit mostly foreign shareholders is a shocker (worse because the tax cut compensation of the carbon price remains, creating a black hole which the Liberals are filling by gouging low income earners and the young.)

Etc etc.

Their cynicism is total. They are a real danger.

(By the way, it is good and interesting that an economics commentator - one as good as Martin too - isn't just arguing dry numbers but social impact. We live in a society, not an economy, even if the Liberals are intent on making it a corporatocracy.)

Commenter

Craxy

Date and time

May 20, 2014, 1:24PM

Hey Jordan

We are well past the outrageous and now well into the hysterical where details like facts go out the window.

Commenter

Sherlock

Location

Sydney

Date and time

May 20, 2014, 1:31PM

Let's be honest (they won't) the Libs conduct towards the "unwashed masses", as they view most Australian, contained in their spiteful budget is disgusting. Full stop.

Commenter

sir fitzy of kogarah

Date and time

May 20, 2014, 1:31PM

Hey Jordon

""or personally attacking public figures like Treasurer Hockey because he's now well off (after starting with nothing). ""

We are attacking Hockey not because he is well off, but because he LIED. Because he attacked the poor, the unemployed and the elderly. That's not hard to understand

""But the rubber hits the road on shows like Q&A where audience members ask questions of the Treasurer based on what they've read in Fairfax that shows all Australia how misinformed they are. Watch last night's Q&A if you care to understand the actual facts.""

If you ACTUALLY watched the show you would know that Libs supporters made up more percentage than any other party voter. So technically, your remarks are pointing to Abbott supporters

Nice try, but no cigar

Commenter

Roger

Date and time

May 20, 2014, 1:34PM

This government? Principles? Seriously, 'Seriously,' you make me laugh.